GIC, ADIA to put $450 million into Greenko

Ever since losing the opportunity to acquire Reliance’s Mumbai power distribution business to Adani in 2017, Greenko has planning this new strategy, the executives said.Arijit Barman | ET Bureau | June 05, 2018, 08:06 IST

MUMBAI: Hot on the heels of the billion-dollar acquisition of Orange Renewables, Greenko’s key shareholders GIC of Singapore and Abu Dhabi Investment Authority (ADIA) have agreed to infuse another $450 million to bankroll the company’s next phase of growth. This involves 15 GW of integrated, round-the-clock renewable assets combining hydro, wind and solar with the latest storage technologies.

This will be the largest single round of capital raising by a green energy company in India, overshadowing previous initiatives by Re-New Power Ventures that received $247 million in April for Ostro Energy’s buyout. Greenko Group on Monday announced the acquisition of Orange Renewable from Singapore’s AT Capital Group at an enterprise value of $1 billion. ET reported this ahead of the announcement.

After this round, both investors will have cumulatively invested $1.3 billion with GIC alone putting in $1 billion since 2015 in four rounds.

Addressing Needs of DiscomsGIC will remain the controlling shareholder with a 60% stake.

The two first-generation founders, Anil Kumar Chalamalasetty and Mahesh Kolli, control about 25% while ADIA holds the remaining 15%.

“We will not pursue standalone renewable assets. Our focus for the next three-five years will be on building integrated round-theclock renewable energy which can compete with base load curves to address the real needs of the discoms when our Indian energy market is transitioning from a deficit market to a real demand-driven market,” Greenko group CEO Chalamalasetty told ET.

“Our new assets will compete with conventional coal energy projects on quantity, quality and cost. We are working on building 15 GW round-the-clock renewable assets that will deliver 3GWs of base load. It’s a unique proposition but is required today.”

POWER OF THREEThe plan is to have three strategic “integrated asset class” assets — one in the north and two in the south that are dispersed across the country to create a bundled form of energy supply. Most of the incremental investments will go into storage technology.

In recent months, there has been a big drop in new base load capacity addition while existing capacities have been operating at half of their rated levels.

Close to 40 GW of base load assets are facing coal supply crunch or other disruptions. Gujarat recently saw a base load drop of 5GW. As a result, spot prices on the electricity exchanges have spiked to Rs 11-12 per unit from Rs 3 per unit earlier.

Renewables are a 5-10% additional energy source on top of the base load powered by coal and gas.

The challenge facing India’s power grids is the base load and clean energy on its own cannot be a replacement.

“Renewable got the tag of cheap energy but it is destabilising the grid. Coal is of course firm energy but in the last few months both crude and coal prices have gone up. We don’t have a fixed-price, inflation-protected energy,” said Greenko joint managing director Mahesh Kolli.

“In most markets, gas acts as a flexible base load energy to support renewables but we do not have that option with domestic gas and LNG imports cannot be a cheaper alternative either, so the discoms are all feeling the heat of this. We think we can create value — the capital infusion will support that growth plan.”

The Central Electricity Authority (CEA) reported a month ago that the more renewable energy is pumped into the distribution networks, the more expensive it gets for the grid.

According to its calculations, every unit of energy from renewables is costing the discoms an incremental Rs 2 to Rs 2.50 per kilowatt hour.

Most of the investments will go into storage technology. Battery prices are coming down but pumped hydro storage is becoming an important asset class.

“It’s common in Europe and also in Tehri Dam where during off-peak time, you pump to bring the water levels up and vice versa during peak hours,” Chalamalasetty said.

NEW STRATEGYHowever, the existing portfolio of 4.3 GW, inclusive of Orange, will not be part of this since they already have signed power purchase agreements (PPAs) with state utilities while the new assets will be meant for supplying to the national power grid at high voltage.

Ever since losing the opportunity to acquire Reliance’s Mumbai power distribution business to Adani in 2017, Greenko has planning this new strategy, the executives said. Construction work is slated to begin later this calendar year.

Commenting on the Orange acquisition, the biggest by the company so far, Kolli said more than scale it was the geographical complementarity that helped.

“We are working with a large cluster approach in states where we operate,” he said. “Adding the (Orange) portfolio within those clusters is part of our business model. We did not acquire Orange because it has a gigawatt size portfolio, but because of the assets meeting the Greenko’s operational and financial benchmark returns.”

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